Renewables Rule Transmission
FERC finalizes regional cost allocation
Nov 3, 2011 - Bill Opalka - renewablesbiz.com
Federal regulators have approved a long-anticipated rule for transmission that gives “public policy requirements” important status in determining planning requirements and cost allocation. Renewable energy integration is the policy requirement most widely understood as the beneficiary of the policy, which has been controversial since the rule was proposed 13 months ago.
The Federal Energy Regulatory Commission (FERC) said its Order 1000 will eliminate barriers to transmission development. Opponents have maintained the policy will saddle customers who do not directly benefit from the expanded facilities with excess costs.
The rule establishes three requirements for transmission planning:
• Each public utility transmission provider must participate in a regional transmission planning process that satisfies the transmission planning principles of Order No. 890 and produces a regional transmission plan.
• Local and regional transmission planning processes must consider transmission needs driven by public policy requirements established by state or federal laws or regulations. Each public utility transmission provider must establish procedures to identify transmission needs driven by public policy requirements and evaluate proposed solutions to those transmission needs.
The rule establishes three requirements for transmission cost allocation:
• Each public utility transmission provider must participate in a regional transmission planning process that has a regional cost allocation method for new transmission facilities selected in the regional transmission plan for purposes of cost allocation. The method must satisfy six regional cost allocation principles.
• Public utility transmission providers in neighboring transmission planning regions must have a common interregional cost allocation method for new interregional transmission facilities that the regions determine to be efficient or cost-effective. The method must satisfy six similar interregional cost allocation principles.
“This rule is an important step forward, building on FERC’s successful market reforms over the past 15 years,” FERC Chairman Jon Wellinghoff said. “Our action today promotes efficient and cost-effective transmission planning and the fair allocation of costs for new transmission facilities. These changes will provide consumers with greater access to efficient, low-cost electricity.”
The renewable energy industry and some transmission advocates have endorsed the policy from the outset. “AWEA applauds FERC for its leadership in finalizing reforms that could serve to cut the Gordian knot that is blocking investment in our aging power grid,” said American Wind Energy Association (AWEA) CEO Denise Bode. “This is an important step toward removing the main hurdle: how to make sure all users pay their fair share of new lines. Preventing free-riding will help improve grid reliability, and reduce electricity bills by facilitating access to lower cost resources, including wind energy."
Policy opponents are ready. In a recent commentary, Bruce Edelston, executive director of the Coalition for Fair Transmission Policy, said the transmission proposal burdens consumers with the costs of new electric facilities from which they receive little or no benefits.
"FERC action on cost allocation for new transmission should ensure the lowest reasonable cost to consumers, not the largest possible subsidies to clean energy developers and transmission companies," Edelston wrote in The Hill newspaper.
Order No. 1000 takes effect within 60 days of publication.
Some members of the U.S. Senate Energy and Natural Resources Committee that share the coalition’s view have requested hearings.
Guaranteed: this is not the last time you will be reading about this.